Cost $~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ \$ 22,000,000 \quad \$ 22,800,000$ -Consider the Table Above

question 19

Multiple Choice

$\begin{array}{lrr}Units&275&300\\\\\text { Gross Revenue } & \$ 3,267,000 & \$ 3,564,000 \\\text { Vacancy } & 163,350 & 178,200 \\\text { Expenses } & \underline{1,143,450} & \underline{1,247,400} \\ \text { Net Operating Income } & \$ 1,960,200 & \$ 2,138,400\\\\\end{array}$
Cost $~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ \$ 22,000,000 \quad \$ 22,800,000$
-Consider the table above. An investor-developer demands a return of at least 9 percent on cost. Which of the following statements is TRUE based on the information above?

• A) Neither project produces a sufficient expected return
• B) The 275 unit project produces a sufficient return, but the 300 unit project does not
• C) The 300 unit project produces a sufficient return, but the 275 unit project does not
• D) Both projects produce sufficient return, but the 275 unit project produces a higher return than the 300 unit project

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Definitions:

Direct Labor

The work of employees that can be directly attributed to the production of goods or services.

Fixed Overhead

Regular, fixed expenses associated with the operations of a business that do not vary with production volume.

Raw Material

Basic materials used in the production process of goods, often processed in intermediate steps before fabrication of the final product.

Fixed Overhead

Charges that keep the same level despite the degree of manufacturing or sales activities, including space rental, worker wages, and protection plans.